Elliot Clarke, Research Analyst at Westpac, explains that China’s PMIs again reported a fairly stable trading environment in the month of August.
Key Quotes
“For manufacturing, it is evident that external demand has softened. New export orders are currently 1.8pts below average according to the NBS, down from March’s flat reading. The Caixin PMI tells a very similar story, its export orders’ series having fallen by a similar amount over the same period.”
“Orders from the domestic economy have held up better however, leaving total new orders 1.5pts below average.”
“To the extent that the NBS put current production only 0.7ppts below average (-0.4ppts for Caixin), the new orders detail points to a further slowing of current activity in coming months. This fits with our expectation that aggregate activity will moderate further in the second half of 2018.”
“A positive for aggregate growth is that manufacturing employment is little changed.”
“All told, the August PMI reports offer no cause to alter our views on China’s economy. We are cautious on credit and investment, but for now it seems likely that robust aggregate growth will persist despite these headwinds.”
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